* Talk of cotton sale cancellations hound market
* Rekindled euro zone crisis weighs on cotton futures

May 23 (Reuters) - Cotton futures settled Wednesday at a
fresh 2-1/4-year low on speculative sales touched off by renewed
worries over euro zone debt, analysts said.
Key July cotton on the ICE Futures U.S. exchange
dropped 3.01 cents to end at 71.51 cents per lb, ranging from
70.53 to 74.26 cents.
It was the lowest settlement close for the spot cotton
contract since early February 2010, according to Thomson Reuters
data.
New-crop December fell 2.82 cents to close at 68.75
cents, dealing between 67.73 and 71.40 cents.
World stocks skidded and the euro fell to a 21-month low as
worries over Greece's possible exit from the euro zone and how
it would adversely impact global economies hit
cotton futures as well.
Traders said that aside from fears over the euro zone,
cotton was also pressured by talk that China may be selling some
of its state reserves and that some cancellations of U.S. cotton
exports may have taken place as the price tumbled.
"Everything seems to be interconnected today," said
independent cotton analyst Mike Stevens of Mandeville,
Louisiana.
Traders said any cancellations by China will only show up in
the U.S. Agriculture Department's weekly export sales report
next week when the activity for this week is tallied.
The 14-day relative strength index reading stood near 21,
from a previous reading of 24. A reading of 30 or below normally
means a market is oversold and one of 70 or higher means it is
overbought.
Volume on Wednesday reached slightly over 33,000 lots, about
a third above the 30-day norm and on track for a fourth day of
rising volume traded, Thomson Reuters data showed.
The amount traded on Tuesday stood at 23,879 lots, having
risen for the third consecutive session, according to exchange
data.
Open interest in the cotton market, an indicator of investor
interest, amounted to 190,015 lots as of May 22, the highest
level since April 5, ICE Futures U.S. exchange data showed.